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American manufacturing declined in November at the steepest rate in 26 years, leading Europe and Asia into an industrial slump as a recession that began in the US in December 2007 spreads around the globe.

 

The Institute for Supply Management’s factory index dropped to 36.2, below economists’ forecasts, and its gauge of raw material costs plunged to the lowest in six decades, intensifying concern over deflation. The Tempe, Arizona-based group’s report came as factory indexes in China, the UK and Russia all fell to record lows.

 

A report from the Commerce Department also showed construction spending fell 1.2 percent in October, a bigger drop than forecast, as a slump in homebuilding spread to non-residential projects such as power plants, churches and highways.

 

New orders for factories decreased to 27.9, the lowest since 1980, from 32.2 the prior month.

 

The index of prices paid dropped to 25.5, the lowest level in six decades, from 37. That adds to concern that the US economy may be at risk of deflation, a sustained decline in prices and wages caused by scarce credit.

 

Deflation can worsen a recession by making debts harder to pay and countering the effect of interest-rate cuts.

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